One of the most important aspects of your finances is your credit history. A good credit history can save you money on the interest you pay for loans as well as influence other aspects of your financial life. Your credit history isn’t just about getting a good deal on your next loan. It can also influence whether or not you are approved for cell phone service, the premium you pay for your auto insurance, and even whether or not some employers hire you.
For better or worse, credit history is an important part of our society. We tend to judge others by what’s in a credit history — even if the assessment may only be peripherally related to financial habits. Ideas of general responsibility, capability, and more are based on what’s in a credit history. Building a good credit history requires planning and discipline.
The whole point of a credit history is to evaluate your ability to handle credit. To build a history, it is vital that you use credit in some way. There are ways to build up your credit score without credit cards, and there are alternative ways of establishing credit, but the fastest way of creating a credit history remains borrowing money and paying it back.
One of the easiest ways to start a credit history is to get a credit card and start using it. This can be tricky, and you need to be careful. Credit cards are seductive. If you are irresponsible, you could end up maxing our your card and carrying a balance. This can damage your credit history — especially if you get in over your head and start missing payments. It would be better to have no credit history than a severely damaged history.
Even though it takes more time you can also use installment loans like auto loans to help establish a credit history. As you pay down these loans you begin to establish a history. You can also speak with prepaid debit card providers, utility companies, and even your bank about how they report your behaviors. You might be able to get them to report your good habits to one of the three consumer credit agencies.
It’s not enough to have a credit history; you have to make sure that it’s a good credit history if you want the best benefits. A good credit score, which reflects a good credit history, can be the way to let others know that you are responsible and capable — especially in money matters.
As you build your credit history, pay attention to the following items:
With discipline, spending only what you have, and paying your balances off, you should be able to build a good credit history that will help you in the future.
|700 - 750||Good|
|640 - 700||Average|
|580 - 640||Poor|